IMF predicts revenue deficit in 2013/14

Overall tax collection is likely to fall below the targets for 2013/2014 fiscal year projections, the International Monetary Fund (IMF) has said.

The shortfall, IMF said, is likely to require sizable adjustments to the 2013/14 plans in the coming mid-year review to align expenditure with resources.

IMF Head of Mission to Dar es Salaam, Mr Paolo Mauro, said in a statement that the government has reaffirmed its commitment to agreed fiscal deficit target of five per cent of GDP.

“For the current fiscal year (July 2013 - June 2014), tax revenues are likely to fall short of initial projections,” Mr Mauro said after the mission completed its work last week.

IMF suggested that to sustain economic growth and to stem fiscal pressures during the current and next fiscal year, priorities include mobilising additional revenues by reducing and simplifying tax exemptions and bringing sustainability in the power sector.

Fortnight ago, the National Assembly was told that the government missed revenue collection target by 513bn/- in the first quarter of the current financial year, equivalent to 14.3 per cent cent.

Furthermore, government plans in the 2013/14 financial year have been thrown into disarray after it spent more than what was allocated in the recurrent votes.

According to the Budget Committee the government collected 85.7 per cent or 3.085tri/-, in the first four months of 2013/14. The collection ceiling was 3.598tri/-.

Tax revenue collection fell short by 14.6 per cent. Instead of raising 2.492tri/-, the government managed to bag in only 2.082tri/-.

The IMF in its mission said the key medium-term policy challenges include fostering continued strong growth through productive infrastructure investment, while preserving priority social spending and maintaining debt sustainability.

Others are enhancing the institutional framework to ensure that possible future revenues from newly discovered natural gas deposits benefit all citizens; and improving the business climate.

“Discussions will continue in the coming weeks; the next IMF Executive Board meeting on Tanzania is tentatively planned in early 2014,” Mr Mauro said.

On other hand, the mission said the economy has continued to perform well, growing by 7.0 per cent in the first half of this year.

“The economic outlook is promising, with growth projected to continue at a similar pace for the full year,” the IMF said adding “overall inflation fell to 6.1 per cent in September with core inflation (excluding food and fuel prices) at 5.8 percent.”

The mission met with the Minister for Finance and Economic Affairs, Dr William Mgimwa, BoT Governor, Prof. Benno Ndulu, and other senior government officials, parliamentarians, the private sector and civil society, and development partners.